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How Natural Resources Boost the U.S. Economy

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natural resources

Oil shale may once again make oil an abundant natural resource in America.

Photo: Drexel University

What Are Natural Resources?:

Natural resources are materials from the Earth that people use to meet their needs. There are two major types of natural resources. The first, renewable resources, are those that are used at a slower rate than they are replaced. These include water, wind and the sun. Two categories, plants and animals, are considered renewable even though many specific species are going extinct. Non-renewable resources are those that are used faster than Nature can create more. These include oil, coals and natural gas as well as minerals. The sun could be considered a non-renewable resource because one day it will burn out, but since it will be millions of years, most people put it in the renewable category.

America's Natural Resources Gave the Economy a Head Start:

The U.S. was blessed with an unusual abundance of natural resources. First, it has a large land mass that early on became governed by one political system. Second, it was bordered by two large coastlines that provided food and later ports for commerce. Third, it had thousands of acres of fertile land, thanks to the Great Plains. Fourth, it had abundant fresh water. Fifth, it was once under a great sea, creating an abundance of oil, coal and natural gas. Sixth, it was easily accessible via ocean or land, making it attractive to immigrants and creating a diverse population.

Large Land Mass:

The geography and geology of the U.S. provided a tremendous comparative advantage in building our economy. Only Australia and Canada have both similar size land masses that are not bordered by enemies, as China and Russia have. This large land mass under one nation allows economies of scale in government and businesses, which lowers the cost of providing services and products.

Coastline:

America's has 95,471 miles of shoreline, including the Great Lakes, which border 26 of the 50 states. The coast contributed $222.7 billion to Gross Domestic Product (GDP), creating 2.6 million jobs in 2009. (Source: NOAA, Shorelength)

Nearly three-quarters of these jobs are related to tourism and ocean recreation. However, the highest paying sector is oil drilling, which pays $125,701 per worker. The ocean also provides other industries, including ship and boat building, transportation and shoreline construction. (Source: NOAA, The Ocean and Great Lakes Economy)

America is fortunate to have so much coastline. Countries that are landlocked or have little access to the sea find that both exports and imports are more expensive. Commerce in landlocked countries are dependent upon the whims of another government. America's large coastline meant it was not bordered by hostile governments, which allowed the U.S. to develop peacefully without the need to incur large war costs.

Farmland:

Unlike Australia and Canada, the U.S. had temperate climates combined with fertile soil. The early settlers found rich soil on the Great Plains, the 502,000 square mile area between the Mississippi River and the Rocky Mountains. The plains were a huge basin sculpted out by glaciers during the Great Ice Age. As a result, mountain streams from the Rockies first deposited layers of sediment and second, cut through the sediment to create plateaus. These large flat areas were therefore untouched by erosion, allowing the creation of thick sod. That initially allowed tremendous agriculture.

However, the Great Plains is semi-arid, receiving on average less than 24 inches of rainfall a year. The Plains became the bread basket of the world only after irrigation was put into place. The water came from streams fed by the Rockies. (Source: NDSU, The Geologic Story of the Great Plains, 1980)

Water:

Roughly 80% of the water used in America is withdrawn from lakes, rivers and stream. Although an astonishing 41% was used in the thermoelectric-power industry to cool electricity-generating equipment, it is returned. Agricultural irrigation uses 31%, and it is not returned. Families, businesses and industries used the rest. Only 20% has to be pumped out of the ground, and this is mainly used for irrigation in the semi-arid Great Plains. (Source:USGS, Freshwater Usage; Water Use)

Oil, Coal and Gas:

The US has the world's largest reserves of coal, at 491 billion short tons or 27% of the total. This abundant source of energy helped fuel U.S. growth during the Industrial Revolution, as it was used to drive steamships and steam-powered railroads. After the Civil War, coke (a derivative of coal) was used to fuel the iron blast furnaces that made steel. Soon after that, coal ran the electricity generating plants -- and still does. (Source: CIA World Factbook; Department of Energy, Coal History)

The U.S. had huge reserves of oil that were easily accessible, unlike Canada's shale oil. As World War I was brewing, the U.S. converted its coal-burning Navy ships to oil. Oil made ships faster, extended their range and allowed easier refueling. Oil was also easily available on the West Coast, allowing the Navy to extend its reach across the Pacific. Oil made possible many innovations, including cars, trucks, tanks, submarines and airplanes. Scientists made TNT out of toluene, which they extracted from oil. The U.S. supplied more than 80% of Allied requirements during World War I.

After the War, oil supplied the power for the internal combustion engine, as well as the oil-powered machinery and petrochemicals needed to boost agricultural production. In 1920, America supplied two-thirds of the world's oil production.

The number of cars registered increased from 3.4 million in 1916 to 23.1 million by 1929 allowing America to move away from public transit. By 1925, oil accounted for nearly one-fifth of U.S. energy consumption, growing to one-third by World War II. Other countries only used oil as a secondary fuel, and it accounted for less than 10% of their energy consumption. When the giant East Texas oil field was discovered in 1930, overproduction became the main issue facing the oil industry. (Source: Journal of American History, Oil and the American Century)

People:

America has welcomed more immigrants (50 million) than any other country, and still admits nearly 700,000 annually. Most of the people who came had the courage and flexibility needed to survive in a new country. As a result, Americans are more willing take risks, which has created lots of innovation especially in technology. This cultural diversity is a strength in groups, if people remember their common goals. That's because it brings fresh perspectives based on different experiences. However, it takes the willingness to be open-minded and non-judgmental about the value the differences bring.

President John F. Kennedy, the grandson of Irish immigrants, summed it up well when he call America, "a society of immigrants, each of whom had begun life anew, on an equal footing. This is the secret of America: a nation of people with the fresh memory of old traditions who dare to explore new frontiers...." (Source: U.S. Embassy, Society of Diversity) Article updated March 25, 2013

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